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FRACTIONAL JET OWNERSHIP: EVERYTHING YOU NEED TO KNOW & ALTERNATIVES

jan13

Not everyone can afford to buy a private jet. That’s where fractional jet ownership was born. Here is everything you need to know and the best available alternatives.

What is Fractional Jet Ownership?

It’s a part ownership scheme. You buy a fractional share of a jet and are allocated a reflective amount of time in the aircraft. It’s very similar to a buying a time share in a vacation apartment.

The number of flight hours you get is dictated by the size of the share. The most typical fractional jet ownership schemes consider an aircraft to have 800 flight hours per year. This is normal based on market conditions along with servicing and maintenance.

So if you have own a quarter share then the plane is yours for 200 flight hours each year. The smallest fractional ownership is likely to be 1/16th (50 hours) or 1/8th (100 hours).

Many ownership programs work on a five-year basis. After the term has ended you can sell your shares in the aircraft.

Why Would I Want Fractional Jet Ownership?

Rather than chartering or leasing a plane, this approach is a capital investment. You own a fraction of an aircraft and can recoup some of your investment costs. Of course, over the five or more years the value of the aircraft will have depreciated.

The final sale price is decided by its current marketplace value. You could also negotiate the sale of your fractional jet ownership to another private individual. Most companies will charge a reselling fee for us but it can be a viable option.

The smallest ownership program is 1/16th, meaning 50 hours of flight time. If you don’t need a private jet for more than 50 hours a year, the acquisition costs and maintenance fees make it a poor investment. And remember, buying a share is usually a minimum five-year commitment, so you should be planning at least 250 flight hours over that five-year period.

Do I Really Own Part of Jet?

Yes and no. Most companies running jet ownership schemes have a fleet of aircraft. So you don’t necessarily fly in your jet. This makes financial sense as it’s usually cheaper to fly in the aircraft that is closest to your location.

However, you are restricted to a specific size and type of aircraft. Somebody with a quarter share in a turboprop can’t expect to use their hours on a large business jet.

Therefore it’s essential to think ahead about the aircraft you will need over the following five years. Bigger planes with larger capacity and longer ranges will cost more. But part owning a four-seat plane doesn’t make sense if you usually need eight to ten seats.

What Are the Typical Costs Of a Fractional Jet Ownership?

Most of these schemes are for light and mid-sized jets. A handful of companies also offer shares in turboprops as well. The investment required for heavy jets is very substantial and is only for individuals planning many flying hours in large, long-haul planes.

All fractional jet ownership programs have four main costs.

1. Acquisition.

This is the upfront cost, the fraction of a jet that you purchase from a company or individual. The smallest 50-hour share in a light jet starts at $400,000. That figure is closer to $600,000 for a Phenom 300 and increases proportionally for larger aircraft.

There is no discount for buying a higher fraction. If you seek a one quarter share in a mid or large business jet the acquisition will run into the millions of dollars.

2. Monthly Maintenance & Management Fee

Every fractional owner pays a maintenance fee, based on the size of their ownership. This fee includes insurance, maintenance, hangar and storage fees, and usually the pilot’s salary. In addition, you’ll be paying a management fee to the company you bought the jet fraction from.

Much like time shares it’s a smart system. A company sells their aircraft to a variety of individuals, then continues to profit by charging a management fee.

Monthly fees vary enormously, both due to the company and the aircraft. Typically they will start at $7000 per month for a 16th share in a light jet. Expect that to increase substantially if you have a larger share on a larger aircraft.

3. Hourly Flying Fee

Although you part own an aircraft and pay for its maintenance and management, there’s still a fee for every hour you are in the air. This covers fuel and other in-flight costs, sometimes with a surcharge or percentage added.

4. Miscellaneous Fees

Check the contract carefully as miscellaneous fees add up. In particular, what is included and excluded in the monthly maintenance and management fee. For example, de-icing charges, airport taxes, state taxes, preferred airport FBO surcharges, taxi time fees, federal excise tax, and other unspecific charges.

Part Ownership of a Phenom 300 – Example Costs

The Embraer Phenom 300 has a standard configuration of six seats and a range of 2268 miles. This calculation is based on a one quarter ownership with a five year contract, equating to 1000 flying hours over the ownership period.

One-Off Acquisition Costs: $2.8 million

Monthly Maintenance Fees @ $12000 per month: $720,000

Hourly Flying Fee @ $2200 per hour: $2.2 million

Miscellaneous Fees @ $10,000 per year: $50,000

Total Cost for 1000 Flying Hours: $5.77 million

This is a conservative estimate. You can compare it to the fractional jet ownership costs of a Citation X.

Compare Fractional Jet Ownership Costs Vs Jet Charter

With a jet charter you only pay for the hours you are in the air. A light jet such as a Phenom 300 costs around $2000 – 2700 per flying hour.

It’s worth noting that the hourly flying fee is similar between fractional ownership companies and jet charter operators. Also consider that the acquisition and monthly maintenance costs have long-term benefit to the owner.

A new jet will depreciate between 10 and 30 percent each year during the first five years of ownership. This depreciation is tax deductible. So at the end of the program you should be looking at recouping around half of your initial investment.

Other Than Cost, What Are the Other Limitations of Fractional Jet Ownership?

The other big disadvantage is that fractional jet ownership locks you into a specific type of aircraft. It can makes sense for a business who can predict their aircraft needs many years in advance. However, owning a share in a Phenom 300 is no use if you want to cross the Atlantic. Nor does such ownership help when there are more than six passengers.

You will be tied into a rigid five-year contract, with no flexibility over the type of aircraft you use. And even for the most forward thinking individual, five years is a long time.

Other limitations include:

  • The minimum number of flying hours may be more than you need for a year.
  • The contract is for five years so you need to foresee five years of flying hours.
  • Unused hours mean you lose out on your investment.
  • Popular travel dates mean you can’t always fly when you want.
  • With only a small share you will lose out when suffering something similar to blackout dates during peak times.
  • Even with an ownership there are lead in times for making a reservation, so you must book in advance.

Alternatives To Fractional Jet Ownership

Fractional jet ownership has gone out of fashion in recent years. Two decades ago it was a mechanism for more people to fly on private jets. And just like the time-share boom it’s something that has had a rocky road since inceptions. So what are the alternatives and how can you maximize the time benefits of flying on a private jet.

Outright Jet Ownership

If you can invest over $5 million in a fractional jet ownership it probably makes more sense to buy your own jet. This way you can tap into financial benefits such as leasing your plane to others, which can offset the costs of needing a different plane. The management fees are lower and there is no fixed-term contract. Of course, buying a private jet is a luxury that very few people can afford.

Private Jet Cards

Private jet cards are very similar to fractional jet ownership in that they provide you with a specific number of flight hours on a specific type of jet. Most jet cards start at 50 hours per year but you can find some with just 25 hours.

You’ll pay a set up fee, a monthly fee, plus the hourly rate. Like jet ownership you must use all your allocated hours in order for the jet card to make financial sense. There are other similar limitations, such as an inflexibility around the choice of jet and an abundance of black dates.

This article has everything you need to know about private jet cards.

Private Air Charter

Of course, in a dream world you would only pay for the flights you need. With each flight you would choose the most suitable aircraft, dependent on the range and capacity required. In many ways it would be just like chartering a taxi or any other private transport service. There wouldn’t be any ongoing costs, it would just be pay as you fly.

That solution exists. With an Airvel private air charter you charter the aircraft that’s best for you. There are no limitations over aircraft or route.

1. Use the instant search function to compare prices of different aircraft from different operators.

2. Select the aircraft that is best for you.

3. Pay for that aircraft to confirm.

4. Fly.

With Airvel there is no long-term commitment or need for pre-investment. You can start with zero. We believe anyone can fly on a private jet and our world-leading booking engine is changing the image of private air charters.

SEARCH FOR FLIGHTS 

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About Author

Peter Murray
Peter Murray

An aerospace engineer with over 30 years experience, Peter has been involved with some major aviation breakthroughs. For example, we was part of the team that designed the Lockheed SR-71 Blackbird. But you don't need to know what happened in the 80s. Peter now uses his technical knowledge as a director at one of the US's fastest growing aerospace companies.

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